DTT between Serbia and Republic of Korea

UniCredit Bank Serbia JSC
Summary: 
Double Tax Treaty (DTT) agreement with Republic of Korea will come into force as of 1 January 2017
Wed, 21/12/2016

The contracting states notified each other in writing that the procedures required by their domestic laws for the DTT’s entry into force have been successfully complied with. DTT agreement between Serbia and Republic of Korea, as it was previously advised, was adopted by the Serbian Parliament in February 2016 and shall enter into force as of 1 January 2017. 

The DTT provides the following benefits for the investors:

Article 10 – Dividends:

  • 5% withholding tax rate will apply to the gross amount of the dividends if the beneficial owner (other than a partnership) directly holds at least 25% of the capital of the company paying the dividends
  • 10% withholding tax rate will apply to the gross amount of the dividends in all other cases.

Article 11 – Interest:  

  • Interest arising in a contracting state and paid to a resident of the other contracting state may be taxed in that other State;
  • Such interest may also be taxed in the contracting state in which it arises and in accordance with  the laws of that Contracting  State; however if the beneficial owner of the interest is a resident of the other Contracting State, the tax charged shall not exceed 10% of the gross amount of the interest;

Article 13 – Capital Gains:

Capital gains derived by a resident of South Korea form the alienation of shares (or comparable interest) in a company, which resides in Serbia, will be subject of withholding tax rate as follows:

  • 0% withholding tax rate, if the immovable property assets of such a company residing in Serbia, whose shares are being aliened, are located in Serbia and not exceeding 50% of its total assets;
  • 20% withholding tax rate, if the immovable property assets of such a company residing in Serbia, whose shares are being aliened, are located in Serbia and equalling or exceeding 50% of its total assets.

Investors from Republic of Korea who intend to exercise DTT favourable rates are obliged to provide Certificate of Tax Residency issued for the current year.

Impact on investors: DTT between Republic of Korea and Serbia is expected to create a more favourable tax environment for eligible investors